Bill Cara: Another junior goldminer candidate, Tues., Jan. 30, 2007, 3:25 PM

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January 30, 2007

Another junior goldminer candidate, Tues., Jan. 30, 2007, 3:25 PM

Today we celebrated Scotland's favorite son, Robbie Burns, with a dish of beef stew, shortbread and haggis. Ray Threlkeld of Western Goldfields provided the lunch and the entertainment.

Entitled "Introducing a Unique Investment Opportunity," Threlkeld went through the usual presentation. My conclusion: what's not to like.

Here are the bullet points:

* Projected 9.5 years annual production of 165,000 oz. gold, starting (full prod.) April 2008
* Cost of sales of $335/oz
* All-in costs of $414/oz
* After-tax IRR est. to be +13 pct @$500 gold; +25 pct @600 gold; and +35 pct @$700 gold.
* Fully funded, fully permitted, and situated in Southern California with a grandfathered environmental permit and an environmental partner in Los Angeles County that needs their fill to cover disposed waste
* World-class resource with completed resource estimate of 3.61 million oz gold and a completed feasibility study for mining 2.36 million oz gold reserves.
* Additional resources are likely with drill results to be reported in February
* Conventional truck and shovel mining with run-of-mine heap leaching
* Politically stable environment " about 120 miles east of San Diego CA and 45 miles northwest of Yuma AZ.
* Outstanding management team that will likely build a success here with this property and use the shares to acquire similar properties for the next several years
* Completed a C$70 million financing a couple days ago, done overnight
* Arranged a C$105 million project debt financing in Nov-06
* Low $286 million market cap capable of expanding by a factor of three after the expected analyst rating upgrades
* Property called Mesquite was acquired from Newmont for 3.5 million WGI shares (ie, less than 10 pct) plus Net Smelter Return of between 0.5 pct and 2.0 pct. Newmont holds additional warrants to purchase 6.1 million shares

Why do you buy the shares of a goldminer? As Threlkeld says, it's because of (i) the resource (ii) management, and (iii) the price of gold. This one is a winner on all counts. I don't think WGI.TO will be trading at a low price for long.

The resource has already produced about 4 million oz of gold at an average cost of sales of less than $200, but was suspended by Newmont in 2001 due to low gold prices. But Newmont acquired expansion permits and grandfathered the mining rights before selling the resource. Another management team failed to do much, and present management stepped in recently (less than a year ago) with financing and a solid track record of success in the gold mining business. This is basically an old mine with a new story. I happen to like the story.

Chairman is Randall Oliphant who until 2003 was CEO of Barrick. CEO Threlkeld was formerly a senior officer at Barrick. Paul Semple and Wes Hanson have a track record of success in the industry, and CFO Brian Penny formerly held that position at Kinross.

Gold prices at this level will generate a substantial profit.

The stock trades on the Toronto Exchange (WGI) ($2.35) and in the USOTC market (WGDF) (US$1.96). I would expect a full U.S. exchange listing soon.

Until I get a better feel for the company, I will set a 12-month Price Target (PT) of C$4.00 (US$3.50). Should gold prices move higher, I will not hesitate to set a higher PT. This one is worthy of looking into. I will follow it closely here in the blog.

Posted by Posted by Bill Cara on January 30, 2007 03:25:20 PM | Category: Goldminer Producers

Discourse

Dear Bill,

This is a great story.

I know that California has gold, but mining costs made it pointless to recover for decades. Now that the price of gold makes mining feasible, a good management that knows what it's doing can do a lot for its investors. You're terrific.

Thanks for bringing this to your fans' attention.

Posted by: GemmaStar at January 30, 2007 4:28 PM [link]

Dear Bill,

I trust you're feeling better.

I took a flier on some CUP late this afternoon at 3.97

Chris

Posted by: zen_archer at January 30, 2007 5:33 PM [link]

Bill,

Did you mean a PT of C$4.00 and US$3.50 or is there some reason I'm missing for having a lower PT in Canadian dollars on the TSE?

Posted by: Fazeli at January 30, 2007 6:18 PM [link]

Chris-

Re: CUP, there doesn't seem to me to be much downside at 3.97.

Realize the stock recently broke out of the downtrend it had been in since the crazy run-up based on the PCU buyout offers. I believe it bottomed ~$3.20 sometime in early Dec.

It may yet drift lower into the 3s in the short-term, but with the BFS coming out this summer I expect it to stay over 4 and appreciate substantially the closer we get to release.

The project seems to be very sound economically with a high IRR. Based on the very conservative pre-feas (I believe the copper cost was $1.10/lb) which did not include the two recent finds, the minerals in Toromocho are worth at least twice the current price.

I have been in this stock for almost a year and a half and have been very impressed with management. They keep checking off the project to-do's they outlined in the prospectus in a timely and thorough manner uncommon with most juniors.

Both David Lowell and Catherine MacLeod Seltzer have very successful track records and Wolfe (the new CEO) seems to be very competent and accomplished as well.

Best of luck...

Posted by: sper0032 at January 30, 2007 6:41 PM [link]

Dear Bill,

Regarding WGDF:

*) This baby is all over the 200 sma like hair on a gorilla ( 6 mo daily)
*) The down move the stock is in is now a 36 % retracement of the prior upmove
*) Slow stochastic on weekly chart is way oversold
*) indicators look good on daily

I will keep a close eye on it and look for it to heat up.

Oh and Sper0032...thanks for the good info and kind words.

Posted by: zen_archer at January 30, 2007 7:54 PM [link]

Coming thro' the rye, poor body,
Coming thro' the rye,
She draiglet a' her petticoatie
Coming thro' the rye.

O, Jenny's a' wat, poor body;
Jenny's seldom dry;
She draiglet a' her petticoatie
Coming thro' the rye.

Gin a body meet a body
Coming thro' the rye,
Gin a body kiss a bodyâ€”
Need a body cry?

Gin a body meet a body
Coming thro' the glen,
Gin a body kiss a bodyâ€”
Need the warld ken?

Posted by: number2son at January 30, 2007 8:28 PM [link]

Thanks number2son,

By blood, I am 25 pct Scottish, 25 pct Irish and 50 pct Italian. My Scottish family is the Dobson's of the MacLeod clan of Isle of Skye. I'm proud to be a Skye Man, if that's the term. I have heard the place is one of the world's most beautiful, and I'm looking forward to visiting one day.

As to Western Goldfields, there is a story here about Caleefornia that I don't want anybody to miss, particularly from CA. Environmentalists and miners can work together, as they do here. WGI is going to be a cash cow, and CA is also going to benefit from the State gold tax of $5 per oz plus the employment and business activity in the State.

This is no Mickey Mouse management team; they are as good as any major mining company, which is shocking for a company with such a small market cap.

Yes, I think this is going to be a great American mining story for many years to come. I am happy to have put you all onto it.

Posted by: Bill Cara at January 30, 2007 9:51 PM [link]

Sorry I am out of the topic..........

What is happening to SNDK ...down 10% in the after market... close to its year low.... where I made money buying it due to Bill's RSI observation in August.

Is this dropping so fast that the RSI is an inappropriate indicator....

or should we wait for a monthly rsi 7 indicators to signal a buy at an even lower price then now in a week or two.

There are no absolute answers, only conjecture and opinion based on expertise and experience and which I seek.

Who is selling and why should we buy instead of sell...???????

People who are selling after hours are not the dumb money like me. ??????? Any help out there!

Posted by: quail at January 30, 2007 10:01 PM [link]

quail,

SanDisk warned of a soft 1Q07 due to an impending NAND flash price-war, probably with MU and others. Although they beat analyst estimates for 4Q06 and crept up initially, it seems that those who owned the stock didn't like the near future prospects. Seeing as how the markets are somewhat on edge (and side-tracking), and the future has a lot of macro-economical uncertainty ingrained in it, soft forecasts are likely to get hit hard.

Posted by: Fazeli at January 30, 2007 11:14 PM [link]

January 30, 2007

Another junior goldminer candidate, Tues., Jan. 30, 2007, 3:25 PM

Discourse

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